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Volume X, Number 302


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October 26, 2020

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EU Commission Adopts Time-Limited Decision for Continued Access to UK Central Counterparties

On September 21, the European Commission (Commission) adopted a time-limited decision to provide financial market participants 18 months within which they should reduce their exposure to UK central counterparties (CCPs) (the Decision).

The 18-month temporary equivalence Decision aims to facilitate the challenges created by the UK’s withdrawal from the Single Market (i.e., Brexit). This period enables EU clearing members to develop strategies and strengthen their clearing capability to reduce their reliance on UK CCPs.

From January 1, 2021, UK CCPs will be considered “third-country CCPs” within the meaning of Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR). A UK CCP will be unable to provide clearing services within the EU unless the European Securities and Markets Authority (ESMA) has recognized the UK CCP, which first requires the Commission to have determined that:

  1. the legal and supervisory arrangements governing the UK CCP are equivalent to those of EMIR; and

  2. the UK CCP is systemically important for the financial stability of the EU.

Considering the first requirement and based on the available information on UK CCPs, the UK’s legal and supervisory framework will be in line with EMIR after January 1, 2021. Where changes have been made, the UK is expected to inform the Commission. The Commission, in cooperation with ESMA, will monitor the UK’s legal and supervisory framework and reserve the right to amend, suspend, review or revoke their Decision.

Considering the second requirement, the 18-month Decision provides ESMA with time to conduct a comprehensive review of the systemic importance of UK CCPs and their clearing services or activities in the EU from January 1, 2021 onwards. Once a review has been made, ESMA will recommend to the Commission on whether a UK CCP should be recognized or not.

The Decision is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 269



About this Author

Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws...

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring and documentation relating to OTC derivatives and structured products.

Prior to joining Katten, Nathaniel was a member of the US Regulatory and the Derivatives and Structured Finance practices at Allen & Overy LLP.

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...